Whether it be chasing online eyeballs or trading for silk and spices, the West has had a long fascination with expanding Eastwards. The lure is part growth fetish, part colonial fervor. But there is a catch. Unlike the Opium Wars of an earlier age, this time round the Orient may have the technology advantage.
Looking through the Nielsen//NetRatings regional web rankings, there is a marked contrast between more Westernised markets such as Hong Kong where US branded portals dominate and emerging fast growth markets such as China and Korea where local brands have the advantage. Brands such as Daum, Cyworld, Sina, Sohu, Tencent and Rakuten may seem unfamilar to some, but in actuality form the top echelons of highly wired markets such as Korea, China and Japan.
The growing influence of local brands has triggered a regional landgrab by US brands. Over the last few years Yahoo, Google, MSN and eBay have turned up the heat in Asia with aggressive acquisitions and local staffing efforts in a bid to shore up their local presence. This modern day incarnation of The Great Game”, whose earlier iteration saw 19th century world powers vying for supremacy in Central Asia, now sees Yahoo spending billions to acquire a lead in in the Chinese auction market, and Google and MSN fighting legal battles over the right to hire a local R&D chief.
Ego expanding acquisitions aside, securing distribution is the main game. Even if you are Google, with a huge global traffic base – signing regional distribution deals with major publishers is essential to increase your ability to sell locally targeted ads. That is especially critical in highly competitive markets such as China where the homegrown search player Baidu already has the edge on local search activity.
The partnership model is bearing fruit for foreign players. Skype has been particularly successful in growing its Asian user base through a focus on distribution. Approximately 28% of Skype’s users are from Asia, with the lion share of their Chinese growth attributable to their distribution relationship with Tom.com.
However the real paradox of engaging with Asia is the disparity between PC and mobile usage. Asia is the world’s largest regional internet market with over 350 million users. But, as reported by Paul Budde Communications, the mobile market in Asia already exceeds 700 million, with annual growth rates of between 20-30%. And thats not all. Wireless data services are also starting to gain critical mass. By March 2005, subscribers to the three mobile Internet services in Japan totaled more than 75 million making it the primary means by which the Japanese engaged with the Web.
Unfortunately for US companies, the mobile is anything but familiar ground. The slow uptake of mobile telephony in the US tends to nurture a bearish attitude toward handset driven opportunities, even when the subscriber numbers tell a different story. The other complicating factor is that in the main, regional mobile carriers still think it is 1995, and that they can defend an AOL style walled garden of content with themselves at the centre.
Change is afoot. Whether it be the development of generic application platforms, falling off network mobile web rates, or WIMAX enabled handsets – Asian consumers will soon be able to cheaply access the Internet from their phones in the way that their US counterparts do from their PCs. All of that adds up to fertile ground for the deployment of mobile search, chat and entertainment applications unfettered by Carrier recalcitrance.
But whether mobile mad Asian consumers will also be Yahooligans or take to Googling prospective lunch dates in between courses depends a lot on the next few years. And like most things that will come down to who signs what deals and with who. Lets just hope there is enough Guanxi to go round.
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